Bank of England Raises Rates to 4 Percent, Its First Hike Since August 2023

The Bank of England raised its key interest rate to 4 percent on Thursday, November 5, 2026, its first increase in borrowing costs since August 2023. The Monetary Policy Committee lifted Bank Rate from 3.75 percent, a rise of 0.25 percentage points, as policymakers moved against inflation that has stayed above the Bank's 2 percent target.

The vote was unanimous that borrowing costs should rise. Eight members of the nine-member committee voted to set the rate at 4 percent. Catherine Mann, an external member, wanted to go further and preferred a rate of 4.25 percent, The Times reported.

Inflation drove the decision

Consumer prices rose 3.5 percent in the year to September, up from a 3.1 percent annual rise in August, Barron's reported. The Bank's new forecasts point higher from here. Its projections show inflation is likely to peak above 4 percent in early 2027, according to The Times.

The labour market gave the committee little reason to wait. Unemployment fell to 4.7 percent in the three months to August, the lowest rate of the year, down from 4.9 percent in the previous quarter.

"Inflation is too high and the economy has been far more resilient than consensus expected," said Antonio Del Favero, head of US rates strategy at Macro Hive, in comments reported by The Times. Peder Beck-Friis, an economist at Pimco, described the move differently. "Without strong second-round effects on core inflation, we see this tightening as a risk-management calibration," he said.

What it means for borrowers

For households on tracker mortgages, the rise lands at once. A 0.25 percentage point increase means about 31 pounds more in monthly repayments for someone with a typical tracker home loan, according to figures from UK Finance reported by The Sun.

Markets expect more. Traders are betting on at least four more rate rises from the Bank over the next 12 months, which would take the base rate to 5 percent, The Times reported.

London is not acting alone

Other major central banks have moved the same way in recent months. The Federal Reserve and the European Central Bank have both raised rates in a bid to stop a surge in energy costs from setting off a wider flare-up in inflation, Barron's reported. Thursday's decision puts the Bank of England back on that shared path, more than three years after it last tightened policy.